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Woolies hardware business takes a hit

Retail giant Woolworths expects full-year profits to increase by between five and six per cent. Resource-2

Earlier estimates by the company had put FY13 profit to be between four and six per cent, but on Thursday, Woolworths revised the figures up to between five and six per cent.

But Woolworths’s hardware store business Masters suffered a $157 million loss, in earnings before interest and taxes (EBIT), which was steeper than the forecast $119 million loss for the full year.

“Actual losses were more than anticipated mainly due to overly-optimistic sales budgets, relatively higher wage costs for new store openings and lower gross margins due to the sales mix,” Woolworths said.

Losses were expected for fiscal 2014 but would not exceed those for fiscal 2013, Woolworths said.

Masters, however, is expected to break even by fiscal 2016 based on moderate sales growth per store, improved efficiencies and margin improvements as sales stabilised.

Hardware and garden distributor Danks posted an $18 million EBIT profit for fiscal 2013, compared with a forecast of $38 million.

Woolworths blamed the lower than forecast earnings on “higher levels of competition in a subdued trade and building sector”.

The retailer’s home improvement division made a $139 million EBIT loss in fiscal 2013, steeper than the forecast $81 million loss.

“More generally, it is important to note that the home improvement sector, as a whole, has been impacted by consumer uncertainty, similar to other retail categories.”

Woolworths shares had fallen by 77 cents, or 2.29 per cent, to $32.92 at 1049 AEST, on a day when the overall market had opened firmer.

AAP

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